Financial Services Banking
Synopsis
The bank’s CFO felt the firm wasn’t properly evaluating liquidity risk. Furthermore, management was laser-focused on credit risk and lacked the bandwidth to address liquidity risk. Eventus did not just build an entire liquidity risk framework and policy, contingency funding plan. The task also included the development of stress testing models that management could run to prove solvency in a wide variety of scenarios. However, the scope of the project grew beyond that since Eventus also needed to implement metrics for daily cash flow. The daily cash flow model which was used in the stress test process and guided management’s subsequent decisions.
Service(s) Utilized
“The bank’s CFO felt the firm wasn’t properly evaluating liquidity risk. The CFO looked to Eventus to help build out this function. Eventus’ work was integral in the company’s response to COVID-19.”
Strategy & Course of Action
Eventus brought in a full-stack team, including its resident bank and liquidity expert. Our team dove in and built a liquidity policy from scratch while our CFO and FinOps team were able to hone-in and build a very detailed cash flow model that could forecast daily flows in a variety of scenarios.
Combined, this group completed building stress tests that the bank used to determine any areas of liquidity vulnerability and improvement strategies. These models were instrumental in the company’s response to COVID-19.
The Results
Eventus’ efforts have given the bank tools to manage liquidity, handle crises, and better forecast daily cash positions. Results of work gave the bank data to prove previous assumptions: the bank is well run, healthy, and would be stable in a variety of challenging scenarios. Eventus was asked by the bank’s CFO to remain on board during the COVID-19 pandemic to provide additional modeling and advisory support.
- Created a detailed liquidity policy framework from scratch
- Built a daily cash flow model to understand bank vulnerabilities in a variety of scenarios
- Crafted contingency funding plans in case “scary scenarios” played out to best prepare bank, which were integral in the COVID-19 pandemic response
